Head to Shanoah Temple. Talk to the Archbishop. It doesn't matter what your first answer is, but be sure to say "Yes" to his second question - he'll only ask once! He'll give you a letter, and the scenario begins.
Make sure you have potions and antidotes aplenty, since the enemies here are tough and poisonous. Good armour is a must, too. When you're equipped, head to Fangi Forest in the usual way.
Enter the tent and talk to the injured monk. You'll give him the letter. Though not advisable, you can duck out if you want to at this point - just go back to Darme and, when he asks, decline to help further.
Leave the tent and head north. The Blue Crystal is the marker Frammel mentioned, and shows the path you need to take; you can grab it if you want. When asked if you want to proceed, agree. As you approach the house, you'll be challenged, and a Poison Corpse will attack. Kill it (use fire-based spells if you have any). Try to open the door; you won't manage. Now you have a choice. If you want to be healed, or to save, then go back to the tent. Talk to Frammel to advance the plot, and then he'll heal you on request. If you want to do things the hard way, then don't do that: instead, examine the door three times then try to leave - another Poison Corpse attacks, you'll hear a voice, and then the door is unlocked.
Either way, once you're inside, head round to the ladder and climb down. If you explore to the northwest you'll fight some more Poison Corpses before coming up against an array of locked doors; so head south instead, then south again. On this next screen you'll see a pair of Hell Bandits guarding a door. Ignore them for the moment: go round past the opening leading into their room, and off to the north. You'll see one of the children you're looking for to your right (behind the guarded door); to your north, another door, which has neither a keyhole nor a visible switch.
Search the wall to the right of the door, halfway between the right-hand torch and the end of the passage, then push the switch. The door will open. On the other side you'll find a corpse; examine it twice and opt to read the note, then examine it again to find a ring.
Now head back round to those Hell Bandits and kill them. Push the switch to the left of the door they were guarding and go in. Talk to the girl. You'll end up back by the tent, where Frammel will give you some holy water. If your MP is low, you can touch the fire to restore it; rest at the save point in the tent to restore your HP.
Return to the house and climb down as before. Head south to the room where the girl was imprisoned, and search the box in there until you find an item (the Silver Robe). Now head back towards the ladder. Before you get there you'll be brought up short by a strange sound; so head back south again. Two Poison Corpses will have appeared. When you've disposed of them, search the north wall next to the light to open the secret door they came through, and follow the passageway behind it.
Sandoro is waiting in the next room. The spirit isn't going to give him up easily; after a brief conversation you'll be surrounded by enemies, three Poison Corpses and a Hell Bandit. It goes without saying that this is your hardest battle yet; hopefully you remembered to pack some Antidotes! Try to gain the platform - taking out the Hell Bandit in the process - at which point you should be able to defend the stairs and keep more than two of the others from attacking you at once. Magic will also be very useful here - again, stick to fire-based spells, as other elements won't hurt the Poison Corpses.
When you've defeated them, head up onto the platform. When Sandoro's finished talking, throw the holy water over him. After a short scene with the spirit, you'll return to the tent once more. Talk to Frammel (he'll go back into the tent), and then to Sandoro, who'll offer you a key. Naturally you want to accept.
Return to the cellars once more, and this time head northwest - take the upper door in the little side passage near the ladder. You'll have to fight a couple of Poison Corpses if you didn't deal with them earlier, but now you can get through all those locked doors. First head down the stairs to the left, enter the library, and read the book on the table; then take the ones to the right, and check the chests in the storeroom (one contains a Morningstar, the other a Large Shield). Of the other two doors, the one on the right leads to a small room containing two jars; the one on the left will restore your HP, the other your MP.
Finally, open the back left-hand door. The Hell Bandit in here shouldn't tax you too far. Examine the only other interesting feature of the room.
That's all you can do for now, so head back to the tent and talk to Frammel again. He'll tell you who the spirit is (an ancient high priest, Dianoas), and offer to read you the letter. It doesn't seem to matter which option you choose; either way, he'll give you an amulet.
Back to the cellars again! Take the south door in the side-passage, and go round to the northwest. There's another group of monsters in this room. If you didn't get Sarac's ring earlier, you'll have to fight them; if you did, then it'll take care of them for you, which is definitely worthwhile. When they're gone, head up the steps. A stone in the northwest corner will start glowing when you approach. Examine it, and out pops Dianoas' spirit! After a moving speech he'll disappear again, and you'll pick up the stone. Take it back to Frammel.
And everyone's happy again. You'll return to Shanoah. Go to the temple and listen to Darme's sermon, and you'll finally receive your experience.